The International Finance Corporation (IFC), a member of the World Bank Group, is investing in Basrah Gas Company (BGC) to support one of the largest gas flaring reduction projects in the world, helping to improve energy access, prevent associated greenhouse gas (GHG) emissions and support a more resilient, sustainable energy sector in Iraq.
BGC is an Iraqi joint venture created to treat and process associated gas that would otherwise be flared. The project is expected to increase BGC’s processing capacity, thereby avoiding more unnecessary flaring and associated GHG emissions by around 10 million tons per annum. It will support Iraq’s transition to a lower carbon path and improve access to a domestic energy source, helping the country meet its growing power needs.
IFC is the lead arranger of the five-year, $360 million loan to BGC.
Ihsan Abdul Jabbar Ismail, Minister of Oil for Iraq, said:
“Signing the loan agreement reinforces the collective efforts to increase investment in associated gas flaring reduction using world-class technologies. It is in line with our objectives of turning flared gas into cleaner valuable energy and reducing the impact of the Green House Gas emissions on the environment.
“This loan opens new horizons for cooperation and collaboration that serve common purposes and interests, reiterating Iraq’s commitment to increasing investment in associated gas flaring reduction and to achieving the objectives set by the Paris Agreement.“
Malcolm Mayes, BGC Managing Director, said:
“We are delighted to have successfully signed this loan with IFC, the first loan facility of its kind in the energy sector in Iraq-a milestone to be proud of.
“The agreement demonstrates the strength of Iraqi companies and their ability to attract funding and trust from international banks. The intent of this five-year loan is to support BGC’s growth project and turn the otherwise wasted flared gas into much needed energy for the country. Our strategy is in alignment with the government of Iraq’s vision to power Iraqi homes with electricity and create a more sustainable energy industry.“
Sérgio Pimenta, IFC Vice President for the Middle East and Africa, said:
“This pioneering project has the potential to deliver significant environmental and economic benefits, including lower GHG emissions and increased fiscal revenues, and will improve energy access and lower costs for Iraqi citizens.
“The project comes after years of hard work and strong cooperation by all parties involved. We hope that it will send a strong signal to other investors and help drive more private investments to tackle climate change and support inclusive growth in Iraq.“
IFC’s investment comprises a $137.76 million loan for IFC’s own account, a $180 million loan in which participations were syndicated to eight international banks (Bank of China, Citi, Deutsche Bank AG, Industrial Commercial Bank of China, Natixis, Sumitomo Mitsui Banking Corporation, Société Générale and Standard Chartered Bank), and a $42.24 million loan through IFC’s Managed Co-Lending Portfolio Program, a platform that allows institutional investors to participate in IFC’s loan portfolio. The loan is without recourse to or guarantees from any of the shareholders.
Iraq is endowed with significant reserves of natural gas, mainly produced as a byproduct of legacy oil extraction. However, in the absence of adequate infrastructure to capture and process it, about 70 percent of all natural gas produced in the country is flared. Capturing associated gas for subsequent use can help Iraq reduce overall emissions.
The project benefits from long-standing engagements of the World Bank Group in Iraq’s energy sector. Iraq joined the Global Gas Flaring Reduction initiative in 2011 and committed in 2013 to eliminate all routine natural gas flaring by 2030.
(Sources: IFC, Iraqi Govt)